Wmax real-time market monitoring shows that the global financial market has recently shown a rare pattern: gold, as a traditional safe-haven asset, has fallen simultaneously with U.S. stocks, Bitcoin and other risky assets. Behind this abnormal linkage is a complex environment dominated by liquidity demand, adjustments to Fed policy expectations, and economic uncertainty. It also means that investors' traditional risk aversion logic is facing reconstruction.

Abnormal asset linkage and short-term failure of hedging properties

Last Friday, international spot gold fell by more than 3%, once approaching US$4,030 per ounce, with an intraday drop of more than US$130. During the same period, the S&P 500 index once fell by 1.3%, and Bitcoin hit a low below US$95,000, and the three had collectively closed down on the previous trading day. This synchronized decline breaks the traditional rule of "gold takes over safe-haven funds when other assets weaken". The Wmax analysis team pointed out that short-term liquidity needs are the core driver. When a sell-off in the stock market triggers a margin call, investors raise cash by liquidating profitable positions such as gold, causing safe-haven and risky assets to move in line.

This judgment is consistent with the view of Michael Armbruster, co-founder of futures brokerage company Altavest, and is also supported by Wmax correlation data: the 21-day rolling correlation between the most active gold futures and the S&P 500 index last Friday was 0.22, showing a slight positive correlation, and the overall moderate positive correlation has been maintained from October to November so far. It’s worth noting that this correlation is not static. Wmax combed through the full-year data and found that the monthly rolling correlation between gold and the S&P 500 index fluctuated between positive and negative, with the annual average close to zero. However, this average value concealed the characteristics of "sometimes strong positive correlation and sometimes strong negative correlation." In a real crisis scenario, the correlation of all assets will approach 1.0, which is consistent with the historical pattern of the market crash in 2008 and the short-term decline of gold in the early days of the COVID-19 epidemic in 2020.

Fed policy leads, interest rate cut expectations cool, suppressing gold prices

Wmax's continued tracking of the Federal Reserve's policy shows that hawkish comments are significantly changing market expectations for interest rate cuts, becoming a key factor suppressing the rise of gold. The Fed has completed two interest rate cuts this year, but some officials cited inflation concerns and labor market stability to weaken expectations for another rate cut in December. According to data from the CME Group's Federal Reserve Watch Tool, the market currently believes that the probability of a 25 basis point interest rate cut in December has dropped to 49%, a significant decline from 64% earlier this week.

The previous record-breaking 43-day shutdown of the U.S. government disrupted the release of key economic data, and the White House suggested that October unemployment data may not be released, further exacerbating uncertainty about policy expectations. Wmax macro analyst team believes that as a non-income asset, the performance of gold is highly dependent on the interest rate environment. Although economic uncertainty still provides support for gold prices, the weakening of interest rate cut expectations directly limits the upside, which echoes the view of ActivTrades analyst Ricardo Evangelista.

Market liquidity and technical factors amplify short-term fluctuations

Wmax market structure analysis shows that the liquidity environment and technical factors have played an important role in recent gold fluctuations. Part of this week's rise in gold prices stems from a technical pattern known as a "gamma squeeze," in which traders selling low-priced options are forced to buy gold futures to hedge their risks, a price shock further amplified by a liquidity vacuum caused by falling OTC volumes. In addition, physical demand data tracked by Wmax showed that physical gold demand in major Asian markets was weak this week. High prices have suppressed purchasing activities, and gold discounts in the Indian market have reached the highest level in five months, which has also limited gold's upward momentum from a fundamental level.

The long-term logic has not changed, and diversified allocation is still the key

Despite the violent short-term fluctuations, Wmax's long-term analysis believes that gold's safe-haven value and allocation logic have not fundamentally changed. Historical data shows that after the crash in 2008 and the short-term decline in the early stages of the epidemic in 2020, gold hit bottom earlier than the stock market and rebounded stronger, ultimately continuing the long-term upward trend and reducing the overall loss of the investment portfolio. The views of Allegiance Gold Chief Operating Officer Alex Ebkarian coincide with those of Wmax: As the costs of the shutdown gradually become apparent and spending plans advance, the dual uncertainty of inflation and growth will be beneficial to precious metals.

So far, gold is still up nearly 60% so far this year and is expected to have its best annual performance since 1979. The long-term allocation value remains outstanding. Wmax suggests that investors should look beyond short-term market noise and pay attention to the importance of asset diversification. The core contradiction in the current market lies in the game between liquidity fluctuations and policy expectations. In the future, we need to focus on the Fed's policy signals, the progress of economic data repair and changes in global market risk appetite.